B.C. Property Transfer Tax: Principal Residence Exemptions

In British Columbia there is a tax on the transfer of land under the Property Transfer Tax Act, RSBC 1996, c. 378. The usual rule is that if you transfer land, or an interest in land, the person to whom you transfer the land (the “transferee”) has to pay a tax of one percent of the fair market value of the land (or of the interest in the land if you are not transferring the whole fee simple interest) on the first $200,000, plus two percent to the extent that the value exceeds $200,000. At one time, with two hundred thousand dollars, you could buy a pretty nice new house, and most people had to pay one percent. Not anymore. Not in Kelowna.

The tax applies to the value of the land, which is not always the same as the price of the land. For example, if you give land away, or sell it for less than its fair market value, the recipient of your generosity still has to declare the value of the land, and pay property transfer tax when he or she registers the transfer at the appropriate Land Title Office.

Fortunately, there are a number of exemptions available, including an exemption on the transfer of a “principal residence” to a “related individual.” This is set out in section 14.

A principal residence is land on which either the transferor or the transferee has resided on the land for a continuous period of at least six months before the transfer, the buildings were designed to accommodate three or fewer families, the buildings are classified under the B.C. Assessment Act as residential, and the land does not exceed a half hectare.

If the land exceeds a half-hectare, but meets the other requirements for a principal residence exemption it will receive a partial exemption based on a formula set out here.

A related individual means:

“(a) a person’s spouse, child, grandchild, greatgrandchild, parent, grandparent or greatgrandparent,
(b) the spouse of a person’s child, grandchild or greatgrandchild, or
(c) the child, parent, grandparent or greatgrandparent of a person’s spouse.”

A spouse includes a married spouse and a person who “is living and cohabiting with another person in a marriage-like relationship, including a marriage-like relationship between persons of the same gender, and has been living and cohabiting in that relationship for a continuous period of at least 2 years.”

A related person does not include a brother or sister.

The exemption applies where a principal residence is passed through the deceased’s estate to a beneficiary who is a related individual to the deceased, and either the deceased or the beneficiary resided in the residence for at least six consecutive months before the deceased’s death.

There is also an exemption on a transfer of a principal residence from a trustee to a beneficiary of the trust if the beneficiary is a related individual to the person who either contributed the land on the trust, or contributed other assets used to buy the land. Either the contributor or the beneficiary must have resided in the residence for at least six consecutive months before the transfer. Please note that the Act does not set out an exemption on the transfer of the land from the contributor to the trustee.

The Ministry of Small Business and Revenue has published a bulletin on "Exemptions for the Transfer of a Principal Residence" here.